How does insurance work?

Depending on what you are insuring against, the insurer agrees to pay you money to help cover costs if that thing happens. For example, if your laptop was stolen from your home, and you had insured it against theft, you could make a claim with your insurer to help cover the costs of getting a new laptop.This is called a ‘transfer of risk’ because the insurer is taking the risk of meeting the cost of the loss. Without insurance, you are taking the risk that you will have to wear the financial loss if things go wrong.